Key Trends Driving Fraud Transformation in 2021

The year 2020 was an unpredictable one in terms of fraud detection and prevention. The events created by the pandemic led to a noticeable uptick in fraud attempts, and its effects are poised to shape our fraud predictions for 2021. Here’s a closer look at some of the key fraud trends based on a recent Aite Group report:

PII Recycling Is the New Prospecting

Fraudsters are becoming less concerned with obtaining new tactics for stealing personally identifiable information (PII) and instead focusing more on how to become more efficient with the processes and tactics they already have. Today, PII is overly abundant, which helps to keep the costs of obtaining PII low. This abundance is further spurred by merchants’ efforts to proliferate their offerings across multiple channels. 

As a result, one of the top fraud trends is looking for ways to overcome identity authentication and verification controls. Fraudsters are stretching the PII they already have, which aligns with the growing inventory of money mule accounts to move money and cash out. 

Some Types of Fraud Rates Appear to be Trending Downward

The rate of change is not evenly distributed across all fraud types. While the data doesn’t display a significant shift in lower fraud rates, it does show a slightly higher number of FIs reporting a reduction in fraud. 

Specifically, fewer FIs reported an increase in debit card fraud and ACH fraud in 2020 compared to 2019. However, other types of fraud, including first-party check fraud and application fraud, have increased in 2020 compared to the previous year. 

Application Fraud and Phishing Pose the Greatest Risks

First-party check fraud has seen a noticeable increase, with 58% of FIs seeing an uptick in 2020 compared to just 39% in 2019. Aite Group notes that this is the only fraud category that is a direct downstream result of application fraud. 

First-party check fraud occurs when someone who uses a fake or stolen identity creates a demand deposit account in which to deposit funds from accounts that are fictitious, closed, or otherwise unable to fund the deposit. Deposits that are undetected allow the user to draw on the credit provided by the FI.

Concerning fraud attack methods, phishing continues to rank as a top concern in fraud prevention. Fraudsters attempt to compromise user identities in order to commit application fraud and account takeovers (ATOs), both of which have increased in 2020. These fraud trends also help to explain the flattening of instrument-related fraud, such as check and credit card fraud. Growing rates of compromised identities are making it easier to conduct ATOs and application fraud, earning them more attention from cybercriminals.

Client Experience Is a Top Priority in Fraud Prevention Transformation

When it comes to fraud detection and prevention strategies, executives in the financial services industry are increasingly focused on methods that enhance, not hinder, the customer experience. In fact, 65% of respondents say that improving the client experience plays a role in getting investments funded. DataVisor’s multi-layered fraud prevention platform helps companies strike a balance between robust fraud detection and a frictionless customer experience. With tools such as device identification, real-time fraud detection, machine learning capability, and the ability to review multiple data points in real time at scale, DataVisor empowers companies to take quick action on potential fraud and allow legitimate transactions to proceed uninterrupted, enabling a better customer experience while preventing fraud. Take a closer look at our multilayered fraud prevention today.